Paypal co-founder Peter Thiel is investing millions of dollars in a Seattle-based company that owns a popular marijuana venture. Under America’s federal laws, however, marijuana is still considered illegal throughout most of the country.

The Founders Fund, Peter Thiel’s venture capital firm, confirmed
it is taking a minority stake in Privateer Holdings – a company
that invests in a Canadian medical marijuana growing operation –
and Leafly.com, a Yelp-type review website for marijuana
dispensaries. Privateer was looking for a $75 million funding
round, but Thiel’s firm has not disclosed how much they’ve
contributed beyond “multi-millions” of dollars.

Investing in the cannabis business is still considered
controversial, though public opinion on the matter has been
turning in favor of legalization advocates. Recreational pot use
is legal in four states and the District of Columbia, and has
been approved for medical use in 24 states. Still, Founders Fund
said it is not an unusual move for them.

The investment “is just a slightly more extreme version of
something we’ve shown in our other investments that we’re
comfortable with,” Founders Fund partner Geoff Lewis told
the Guardian. “We’re fine with investing in businesses with
regulatory ambiguity, because we believe that regulation follows
public sentiment.”

Founders Fund has also invested in companies like Facebook,
Airbnb, and SpaceX.

“Founders Fund is known for making some of the most lucrative
and radically transformational investments of the past
decade,” said Privateer Holdings CEO Brendan Kennedy,
according to a company statement. “With this investment they
are signaling that they, like us, believe that the end of
prohibition and the social harms it causes is inevitable.”

Privateer Holdings was the first private equity firm to make an
investment in the cannabis industry when it acquired Leafly in
2011. It is the only American company to operate a federally
licensed commercial cannabis cultivation operation at its Tilray
facility in Nanaimo, British Columbia.

While marijuana is seen as a potential billion-dollar industry,
US law still requires investors to tread carefully. This case,
with the US-based Founders Fund investing into a company that
owns a Canadian operation, is no exception.

The US Drug Enforcement Agency is reportedly scrutinizing
American businesses investing in marijuana brands for possible
violations like money laundering and drug trafficking. Selling
and possessing marijuana is still illegal under federal laws and
considered a Schedule 1 drug, but Canada passed laws in April
2014 making it legal for any licensed company to grow and ship
medical marijuana. If operations in Canada, using the US banking
system to transfer proceeds from investments into America, became
profitable enough to send money back to American investors, those
investors could be flagged by the government.

“That’s two violation of US federal law. I don’t see there is
any way around it,” Timothy White of Banker’s Toolbox told
Reuters. His company helps banks detect and report money
laundering.

To date, there have been no prosecutions of investors in Canada.
DEA spokesman Rusty Payne said the agency is “most interested
in those types of activities,” but it has “limited investigatory
resources” to pursue investors and therefore tends to target big
investors.